Finance Ministry amends rules on minimum public shareholding for IPOs — Here's a look at the changes, benefits

The Finance Ministry's Department of Economic Affairs (DEA) on Friday notified changes to India's IPO rules with regards to the minimum offer and allotment to the public in an offer document.

The notification dated 13 March, provides a tiered structure for companies and corporations planning to list on the stock exchanges. It amends the Securities Contracts (Regulation) Rules, 1957 to reduce minimum mandated public shareholding of a listed stock from 5% to 2.5%.

The changes were approved by the Securities and Exchange Board of India (Sebi) in September last year before being sent to the government for consideration.

IPO rules amended: Key highlights

The minimum offer and allotment to the public in terms of an offer document shall be:

• At least 25% of each class or kind of equity shares or debentures, if the post issue capital of the company is less than or equal to ₹1,600 crore;
• At least such percentage equivalent to ₹400 crore, if the post issue capital of the company is more than ₹1,600 crore, but less than or equal to ₹4,000 crore;
• At least 10% of each share or debenture if the post listing valuation of the company is above ₹4,000 crore, but less than or equal to ₹50,000 crore. Subject to the company increasing public shareholding to at least 25% within three years of listing;

• At least such percentage equivalent to ₹1,000 crore and at least 8% of each share or debenture if the post listing valuation of the company is above ₹50,000 crore, but below ₹1 lakh crore; and subject to increasing public shareholding to at least 25% within three years of listing;
• At least such percentage of each share or debenture if the post listing valuation of the company is equal to ₹6,250 crore and at least 2.75% of each share or debenture if the post listing valuation of the company is above ₹1 lakh crore but less than or equal to ₹5 lakh crore;
• At least such percentage of each share or debenture if the post listing valuation of the company is equal to ₹15,000 crore, and at least 1% of each share or debenture if the post listing valuation of the company is above ₹5 lakh crore, subject to public shareholding at time of listing being less than 15% and increasing to at least 15% with a period of five years, and 25% within a period of 10 years.

• At least 2.5% of each share or debenture shall be offered to the public, subject to achieving timelines.

What is the impact? Who will benefit?

According to reports, the amendment clears the way for Reliance-owned Jio Platform and the National Stock Exchange's initial public offerings (IPO). Notably, this is the first listing of a major Reliance unit in almost 20 years and could be India’s biggest ever.

Earlier this month, sources told Bloomberg the Mukesh Ambani-led conglomerate is awaiting formal greenlight from the Centre to file draft IPO prospectus. The aim is to file by April this year, the sources added. It also noted that the amendment comes as India's IPO market is facing a weak phase following a bumper 2025 and could help revitalise the space.